From listed equity shares to debentures-How income of NRIs are taxed in India?

 










The income earned by a non-resident Indian (NRI) in India is subject to income tax depending on the quantum of income. In income tax parlance a person will be treated as NRI depending on his/her stay in the country. As per income tax rules, an individual will be classified as NRI if he or she fulfills any of the following three conditions.

- An individual has stayed in India for less than 182 days and income from India is less than Rs 15 lakh

- Physical presence was less than 120 days but the income exceeded Rs 15 lakh

- Physical presence in India during the relevant financial year is 120 days or more but less than 182 days and less than 365 days in the preceding four financial years, even if the India-sourced income exceeds ₹15 lakh.

Again like resident individuals, different sources of income of NRIs are taxed differently in India. Here are they:

Listed equity shares/equity-oriented mutual funds: Short-term capital gains (STCG) are taxed at 15% while long term capital gains (LTCG) are taxed at 10% without indexation exceeding Rs 1 lakh in a particular financial year. The holding period for classification of long term capital gain is 12 months. Rate of TDS deduction is 15% for STCG and 10% for LTCG.

Unlisted shares: In this case, short-term capital gains are taxed as per slab rates while LTCG is taxed at 10% without indexation. However, in this case, the holding period for classification of LTCG is 24 months. Rate of TDS deduction is 30% for STCG and 10% for LTCG.

Debt-oriented MF(listed): STCG are taxed as per slab rates while LTCG is taxed at 20% without indexation. However, in this case, the holding period for classification of LTCG is 36 months. Rate of TDS deduction is 30% for STCG and 20% for LTCG.

Debt-oriented MF(unlisted): STCG are taxed as per slab rates while LTCG is taxed at 10% without indexation. In this case, the holding period for classification of LTCG is 36 months. Rate of TDS deduction is 30% for STCG and 10% for LTCG.

Bonds/Debentures: STCG are taxed as per slab rates while LTCG is taxed at 10% without indexation. In this case also, the holding period for classification of LTCG is 36 months. Rate of TDS deduction is 30% for STCG but 10% for LTCG in unlisted bonds/debentures. For listed bonds/debentures, TDS deduction in case of LTCG will be 20%.



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